Insurance tax hits Coloradans’ principles

Estimated 15% to face decision about coverage

No more than 15 percent of Colorado voters will face a decision about whether to buy health insurance or pay a tax penalty instead in 2014.

As few as 1 percent of voters could end up actually paying the penalty.

Nailing down precise estimates is tough. Reality may be somewhere in between these figures when the Affordable Care Act and its mandate to buy insurance takes effect in 18 months.

Those rough calculations were made for Colorado Public News by the Colorado Health Institute, the state’s collector of statistics on health care.

The estimates are low because the health-care law contains numerous exemptions.

Also, many people qualify for subsidies from the federal government. Some of them are expected to buy insurance instead of paying the penalty. A family of four with a current income of up to $88,000 qualifies for a subsidy.

“There are a lot of moving parts,” said Jeff Bontrager of the Colorado Health Institute, noting that the estimates are based on decisions that are yet to be made by real human beings. Bontrager and his economist colleagues must make assumptions about how many people will do what, based on past experience.

The number is important because the tax/penalty is playing out to be a major campaign issue this November. Republicans are counting on broad voter anger about the principle of requiring Americans to purchase health insurance. But how many end up paying the penalty may – or may not – make a difference to voters.

Here’s how Bontrager reached his figures, based on his estimates and those made by economist Jonathan Gruber of the Massachusetts Institute of Technology in a study for Colorado’s new state health insurance exchange. Gruber, who favors the law, projected totals for 2016, after the penalty has been in effect for two years.

Start with 900,000 uninsured Coloradans (slightly more than today because of population growth).

As detailed in a Kaiser Family Foundation flowchart that illustrates how the individual mandate works under the Affordable Care Act, first deduct: 130,000 low-income Coloradans, who now will get free Medicaid insurance; 152,100 undocumented people; 120,900 who have various other exemptions.

Other exemptions include anyone who must pay more than 8 percent of their income to buy insurance; people who earn so little they don’t have to file a tax return; low-income people not receiving Medicaid insurance for free; religious objectors to standard health care; members of a Native American tribe; and prisoners.

That leaves about half a million Coloradans – or 15 percent – who will have to buy insurance or pay a penalty. The number of voters who get stuck with the penalty drops to a mere 1 percent when adding in age and other factors.

But every one of those numbers is an estimate. By way of comparison, in Massachusetts – which has had mandatory insurance since 2006 when Mitt Romney was governor – 2 percent of the population currently pays a penalty rather than buys insurance.